There are a number of ways to retire wealthy. Over the long run, investing in the stock market has been one of the most-effective ways of accomplishing this feat.
Since 1980, the widely followed S&P 500 has delivered an average annual total return (including dividends) of slightly better than 11%. This means it's taking less than seven years, with dividend reinvestment, for investors to double their money with an S&P 500 tracking index.
But over the past decade, it's not stocks that have led assets in the win column. That distinction belongs to cryptocurrencies. At the moment, none is garnering more buzz than the joke-inspired Dogecoin (DOGE 1.54%).
The answer to "Why Dogecoin?" revolves around three core catalysts. Enthusiasts believe in its increased adoption, its lower transaction fees, relative to the two-largest cryptocurrencies (Bitcoin and Ethereum), and the perception of it having the best community. This has resulted in a trailing six-month gain of as much as 27,000%!
Seven reasons to ditch Dogecoin
But there's a problem: Dogecoin lacks substance and has all the hallmarks of a pump-and-dump scheme. Although it's been a significant outperformer in recent months, there are seven very good reasons to ditch Dogecoin right now:
- Its fees aren't close to the lowest: Enthusiasts love that Dogecoin transaction fees are lower than Bitcoin and Ethereum, but they fail to mention that other coins, such as Stellar, Nano, Ripple, Litecoin, and Dash all process transactions on their networks for much less than what you'd be charged via Dogecoin.
- Transaction validation isn't that fast: In addition to being pricier, Dogecoin transactions don't validate and settle faster than Stellar, Nano, Ripple, or Dash. The typical Dogecoin payment takes 20 minutes to validate and settle, which is twice as long as Bitcoin.
- Transaction data shows stagnant adoption: According to data from BitInfoCharts, Dogecoin has had some very brief daily transaction spikes in 2021, but has otherwise averaged in the neighborhood of 50,000 transactions on its blockchain per day over the past year. By comparison, Visa (V 0.12%) and Mastercard averaged 700 million transactions daily in 2018, per the Nilson Report.
- Minimal real-world utility: It's been eight years since Dogecoin made its debut, and in that time only 1,300 mostly obscure global businesses accept it as payment. This figure further emphasizes what little real-world utility Dogecoin has beyond crypto exchanges.
- Continuous dilution: Cryptocurrency miners who validate Dogecoin transactions are paid block rewards, currently equal to 10,000 Dogecoin. Every year, 5.26 billion Dogecoin are created, which leads to the constant dilution of existing stakeholders.
- Driven entirely by intangible hype: If you haven't figured it out from the previous points, there's nothing tangible driving Dogecoin higher. Its biggest catalyst is the hope that Elon Musk tweets about it on a daily basis. Unfortunately, Musk mentioning Dogecoin has no effect on its utility (or lack thereof).
- History says all bubbles burst: Lastly, every parabolic rise in history has eventually been met with tears. It's only a matter of time before sentiment shifts and common sense prevails.
Kick Dogecoin to the curb and buy these superior stocks
Instead of putting your money to work into a literal joke of an asset with no true staying power, I'd suggest ditching Dogecoin and buying into the following three stocks right now.
Despite their size, brand-name businesses can still make patient investors a fortune. A good example is payment-processing giant Visa.
Visa is a cyclical business, which is a fancy way of saying that it can struggle during contractions and recessions, but it thrives when he U.S. and global economy are expanding. However, recessions often only last a few months to a couple of quarters. Meanwhile, economic expansions are measured in years. A bet on Visa favors long-term investors since gross domestic product (GDP) in the U.S. and globally will rise over time. Higher GDP means more spending, and more payments to process will grow Visa's top and bottom line.
Another thing to consider is that Visa controls more than half of all credit card network purchase volume share in the U.S. -- the U.S. is the No. 1 market for consumption in the world. It also has no shortage of regions to expand to which remain underbanked, such as the Middle East, Africa, and Southeastern Asia.
As one final note, Visa isn't a lender. Though it could use economic expansions as an opportunity to generate interest income and fee revenue, not being a lender means it isn't directly exposed to credit delinquencies during recession. Not having to set cash aside for delinquencies is why Visa rebounds so quickly from economic downturns.
Innovative Industrial Properties
U.S. marijuana stocks could very well have investors seeing green this decade. But it's not just direct players that'll be rolling in the dough. Ancillary pot stocks like Innovative Industrial Properties (IIPR 2.15%) could make long-term investors a lot of money.
Innovative Industrial Properties, also known as IIP, is a medical cannabis-focused real estate investment trust (REIT). This means it acquires cultivation and processing facilities in the cannabis space with the purpose of leasing these assets out for a long period of time. IIP thrives off of long-term rental income and generates modest organic growth via inflationary-based annual rental increases and management fees.
As of May 5, 2021, IIP owned 69 properties spread across 18 legalized states. All 6.2 million square feet of this rentable space was fully leased, with a weighted-average lease length of 16.7 years. Although the company no longer reports its average yield on invested assets, I wouldn't be surprised if it received a complete payback on its investments in seven years or less.
Innovative Industrial also benefits from its sale-leaseback program. With marijuana entirely illegal at the federal level, some banks are unwilling to offer basic banking services to multistate operators. IIP steps in and acquires facilities for cash. It then immediately leases these assets back to the seller. It proves to be a win-win, with the multistate operator receiving much-needed cash and IIP netting a long-term tenant.
Kirkland Lake Gold
Kirkland Lake has two separate catalysts working in its favor. First, the price of gold looks as if it'll be buoyed or head higher in the years to come. A combination of historically low lending rates, ongoing quantitative easing measures, a ballooning money supply, and the prospect of higher inflation, are all favorable for the lustrous yellow metal. It's easy for gold stocks to thrive when the primary asset they produce and sell nets more revenue per ounce.
Second, there are company-specific reasons it'll head higher. For instance, the company's all-in sustaining cost (AISC) of $846 per gold ounce in the first quarter equates to a nearly $1,000 per ounce operating margin. Kirkland three operating mines have consistently been among the most-efficient, with respect to AISC.
Additionally, no gold stock offers a more impressive balance sheet than Kirkland Lake. It ended March with $792.2 million in cash and no debt. A majority of gold stocks sport a net debt position. What's more, Kirkland Lake repurchased 20 million shares of its stock since the beginning of 2020, and it's tripled its dividend.
It's a premier mining stock to buy for precious-metal enthusiasts.